UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Period Ended June 30, 2005
or
|_| Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Transition Period From
________________to_______________.
Commission file number 000-22847
AMEN Properties, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 54-1831588
---------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
303 W. Wall Street, Suite 2300
Midland, TX 79701
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(432-684-3821)
--------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
--------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter periods that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes |X| No |_|
----- -----
Applicable Only to Corporate Issuers
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date: Common Stock, $ .01 Par Value:
2,201,356 shares outstanding as of July 31, 2005.
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
----- -----
INDEX
Part I. FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements
Balance Sheet at June 30, 2005 (Unaudited) 1
Consolidated Statement of Operations--for the three and six months ended
June 30, 2005 and 2004 (Unaudited) 2
Consolidated Statement of Cash Flows-- for the six months ended
June 30, 2005 and 2004 (Unaudited) 3
Notes to Consolidated Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis or Plan of Operation 19
Item 3. Controls and Procedures 27
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27
Item 3. Defaults Upon Senior Securities 28
Item 4. Submission of Matters to a Vote of Security Holders 28
Item 5. Other Information 29
Item 6. Exhibits 29
Signatures 31
Exhibits
11. Computation of Earnings Per Share.
31.1 Certification of Chief Executive Officer.
31.2 Certification of Chief Financial Officer.
32.1 Certification of Chief Executive Officer Pursuant to 18 USC ss. 1350.
32.2 Certification of Chief Financial Officer Pursuant to 18 USC ss. 1350.
AMEN Properties, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
June 30, 2005
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (notes A3, D and F) $ 2,989,596
Accounts receivable (notes A6 and A13) 850,282
Other current assets 153,597
-------------
Total current assets $ 3,993,475
RESTRICTED CERTIFICATE OF DEPOSIT (note G) 2,100,000
PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated
depreciation of $1,052,270 (notes A7, A8 and I) 8,232,560
ROYALTY INTERESTS, at cost net of accumulated depletion
of $ 19,771 (notes A7, A8 and E) 143,083
LONG-TERM INVESTMENTS (notes A4 and F) 62,350
OTHER ASSETS
Note receivable (note H) 241,555
Deferred costs (note A9) 41,525
Deposits and other assets 706,512
-------------
Total other assets 989,592
-------------
TOTAL ASSETS $ 15,521,060
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 682,157
Accrued liabilities (note J) 360,291
Current portion of long-term obligations (note L) 250,155
Accrued interest payable 34,634
Deferred revenue 68,683
-------------
Total current liabilities $ 1,395,920
LONG-TERM OBLIGATIONS, less current portion (note L) 7,347,057
DEFERRED REVENUE 47,833
MINORITY INTEREST (note A11) 289,248
COMMITMENTS AND CONTINGENCIES (note N) -
STOCKHOLDERS' EQUITY (note C)
Convertible preferred stock, $.001 par value, 5,000,000 shares authorized;
80,000 Series "A" shares issued and outstanding, convertible into
a total of 616,447 shares of common stock at the option of the holders (note A12) 80
80,000 Series "B" shares issued and outstanding, convertible into
a total of 233,317 shares of common stock at the option of the holders (note A12) 80
125,000 Series "C" shares issued and outstanding, convertible into
a total of 500,000 shares of common stock at the option of the holders (note A12) 125
Common stock, $.01 par value, 20,000,000 shares authorized;
2,201,356 shares issued and outstanding 22,014
Common stock warrants 127,660
Additional paid-in capital 44,481,382
Accumulated deficit (38,190,339)
----------
Total stockholders' equity 6,441,002
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 15,521,060
============
The accompanying summary of accounting policies and footnotes are an integral
part of these consolidated financial statements.
1
AMEN Properties, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three and Six Months Ended June 30,
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2005 2004 2005 2004
------------- ------------ ----------- -----------
Operating Revenue
Rental revenue $ 672,137 $ 1,073,582 $ 1,342,319 $ 2,147,882
Retail electricity revenue 1,125,596 - 1,436,385 -
------------- ------------ ----------- -----------
Total operating revenue 1,797,733 1,073,582 2,778,704 2,147,882
------------- ------------ ----------- -----------
Operating Expense
Cost of goods and services 1,143,727 - 1,423,375 -
Rental property operations 452,447 585,079 858,109 1,150,073
General and administrative 223,579 142,956 430,565 257,312
Depreciation and amortization 104,671 111,048 196,506 217,501
------------- ------------ ----------- -----------
Total operating expenses 1,924,424 839,083 2,908,555 1,624,886
------------- ------------ ----------- -----------
Net (loss) income from operations (126,691) 234,499 (129,851) 522,996
------------- ------------ ----------- -----------
Other (expense) income
Interest income 15,693 2,603 27,537 6,054
Interest expense (148,149) (147,183) (262,495) (280,591)
Loss on sale of investments - - - (509)
Other income 43,578 15,594 26,414 32,984
------------- ------------ ----------- -----------
Total other (expense) income (88,878) (128,986) (208,544) (242,062)
------------- ------------ ----------- -----------
Net (loss) income before income taxes and
minority
Interest (215,569) 105,513 (338,395) 280,934
------------- ------------ ----------- -----------
Income taxes (note A10) - - - -
Minority interest 4,231 (76,420) (36,593) (159,235)
------------- ------------ ----------- -----------
4,231 (76,420) (36,593) (159,235)
------------- ------------ ----------- -----------
NET (LOSS) INCOME $ (211,338) $ 29,093 $ (374,988) $ 121,699
============= ============ =========== ===========
Net (loss) income per common share (basic) $ (.10) $ .01 $ (.17) $ .06
============= ============ =========== ===========
Net (loss) income per common share (diluted) $ (.10) $ .01 $ (.17) $ .04
============= ============ =========== ===========
Weighted average number of common shares
outstanding - basic 2,201,356 2,201,356 2,201,356 2,201,356
============= ============ =========== ===========
Weighted average number of common shares
outstanding - diluted 2,201,356 3,051,120 2,201,356 3,051,120
============= ============ =========== ===========
The accompanying summary of accounting policies and footnotes are an integral
part of these consolidated financial statements.
2
AMEN Properties, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30,
(Unaudited)
2005 2004
------------- -------------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net (loss) income $ (374,988) $ 121,699
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation, depletion and amortization 196,506 217,501
Loss on sale of investments - 520
Minority interest 36,593 159,235
Changes in operating assets and liabilities:
Accounts receivable (777,547) (4,352)
Deposits and other assets (634,512) -
Deferred costs (76,198) (68,843)
Accounts payable 567,053 53,214
Accrued and other liabilities (211,375) (76,938)
Deferred revenue 46,389 (17,773)
------------- -------------
Net cash (used in) provided by operating activities (1,228,079) 384,263
------------- -------------
Cash flows from investing activities:
Purchases of property and equipment (424,348) (30,500)
Sales and maturity of investments - 50,000
Purchase of royalty interests - (162,854)
Acquisition of limited partnership interest (note B) - (208,346)
Repayments of notes receivable 8,000 5,556
------------- -------------
Net cash used in investing activities (416,348) (346,144)
------------- -------------
Cash flows from financing activities:
Repayments of notes payable (1,513,877) (101,025)
Net proceeds from issuance of preferred stock 2,000,000 -
Minority interest distributions - (129,905)
------------- -------------
Net cash provided by (used in) financing activities 486,123 (230,930)
------------- -------------
Net decrease in cash and cash equivalents (1,158,304) (192,811)
Cash and cash equivalents at beginning of period 4,147,900 2,741,527
------------- -------------
Cash and cash equivalents at end of period $ 2,989,596 $ 2,548,716
============= ============
The accompanying summary of accounting policies and footnotes are an
integral part of these consolidated financial statements.
3
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Organization
Effective October 2002, AMEN formed NEMA Properties, LLC ("NEMA"), a Nevada
limited liability company; AMEN Minerals, LP ("Minerals"), a Delaware
limited partnership; and AMEN Delaware, LP ("Delaware"), a Delaware limited
partnership, to pursue acquisitions as authorized by stockholders on
September 19, 2002. AMEN Properties, Inc. and Subsidiaries is a
self-administered and self-managed Delaware corporation. Effective July
2004, AMEN Properties, Inc. and Subsidiaries and affiliates (collectively
referred to as the "Company") formed W Power and Light, LP ("W Power"), a
Delaware limited partnership to enter into the retail electricity market in
Texas.
The Company's business purpose is to acquire investments in commercial real
estate, oil and gas royalties, retail electricity operations and stabilized
cash flowing businesses or assets. As of June 30, 2005, the Company,
through Delaware's investment in a limited partnership, has a commercial
real estate portfolio consisting of majority ownership in two office
properties located in Midland, Texas comprising an aggregate of
approximately 428,560 square feet of gross leasable area. The investment
was obtained through Delaware's acquisitions of a partnership interest in
TCTB Partners, Ltd. ("TCTB") a Texas limited partnership, totaling
approximately 71.3%. Through its investment in Minerals, AMEN has acquired
an investment interest in an oil and gas royalty trust and other oil and
gas royalties. Through the Company's investment in W Power, Amen entered
the retail electricity market in the state of Texas. The real estate
operations of the Company are primarily conducted through Delaware of which
AMEN is the sole general partner and the retail electricity operations are
primarily conducted through W Power of which Amen is the sole general
partner.
2. Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its majority-owned/controlled subsidiaries and affiliates. Intercompany
balances and transactions have been eliminated.
Management uses estimates and assumptions in preparing the consolidated
financial statements in accordance with accounting principles generally
accepted in the United States of America. Those estimates and assumptions
affect the reported amounts of assets, liabilities, revenues and expenses
in the consolidated financial statements, and the disclosure of contingent
assets and liabilities. Actual results could differ from these estimates.
3. Cash Equivalents
The Company considers cash on hand, cash on deposit in banks, money market
mutual funds and highly liquid debt instruments purchased with a maturity
of three months or less to be a cash equivalent.
4. Investments
4
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
The Company invests in U.S. government bonds and treasury notes, municipal
bonds, certificates of deposit and corporate bonds. Investments with
original maturities greater than three months but less than twelve months
from the balance sheet date are short-term investments. Those investments
with original maturities greater than twelve months from the balance sheet
date are long-term investments.
The Company's marketable securities are classified as available-for-sale as
of the balance sheet date, and are reported at fair value with unrealized
gains and losses, net of tax, recorded in stockholders' equity. Realized
gains or losses and permanent declines in value, if any, on
available-for-sale investments are reported in other income or expense as
incurred.
5. Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, investments, accounts
receivable, notes receivable, and accounts payable approximate fair value
because of the relatively short maturity of these instruments. The fair
value of the fixed rate debt, based upon current interest rates for similar
debt instruments with similar payment terms and expected payoff dates,
would be approximately $7,189,979 as of June 30, 2005. Disclosure about
fair value of financial instruments is based on pertinent information
available to management as of June 30, 2005.
6. Accounts Receivable
Management regularly reviews tenant accounts receivable and estimates the
necessary amounts to be recorded as an allowance for uncollectibility.
These reserves are established on a tenant-specific basis and are based
upon, among other factors, the period of time an amount is past due and the
financial condition of the obligor.
Unbilled revenue is accrued based on the estimated amount of unbilled power
delivered to customers using the average customer billing rates. Unbilled
revenue also includes accruals for estimated Transmission and Distribution
Service Provider ("TDSP") charges and monthly service charges applicable to
the estimated usage for the period.
At June 30, 2005, accounts receivable consisted of the following:
Tenant receivables $ 50,093
Billed electricity receivables 112,554
Unbilled electricity receivables 630,993
Other receivables 57,375
Allowance for doubtful accounts (733)
-------------
Accounts receivable, net $ 850,282
=============
7. Depreciation, Amortization and Depletion
Property, plant and equipment are stated at cost. Depreciation is
determined using the straight-line method over the estimated useful lives
ranging from three to forty years. Leasehold improvements are amortized
5
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
over the shorter of the life of the asset or the remaining lease term.
Intangible assets are amortized over the useful lives of five to ten years
using the straight-line method. Costs for the repair and maintenance of
property and equipment are expensed as incurred. Royalty acquisitions are
stated at cost. Depletion is determined using the units-of-production
method based on the estimated oil and gas reserves.
8. Impairment of Long-Lived Assets
The Company periodically evaluates the recoverability of the carrying value
of its long-lived assets and identifiable intangibles by monitoring and
evaluating changes in circumstances that may indicate that the carrying
amount of the asset may not be recoverable. Examples of events or changes
in circumstances that indicate that the recoverability of the carrying
amount of an asset should be assessed include but are not limited to the
following: a significant decrease in the market value of an asset, a
significant change in the extent or matter in which an asset is used or a
significant physical change in an asset, a significant adverse change in
legal factors or in the business climate that could affect the value of an
asset or an adverse action or assessment by a regulator, an accumulation of
costs significantly in excess of the amount originally expected to acquire
or construct an asset, and/or a current period operating or cash flow loss
combined with a history of operating or cash flow losses or a projection or
forecast that demonstrates continuing losses associated with an asset used
for the purpose of producing revenue. The Company considers historical
performance and anticipated future results in its evaluation of potential
impairment. Accordingly, when indicators or impairments are present, the
Company evaluates the carrying value of these assets in reaction to the
operating performance of the business and future discounted and
nondiscounted cash flows expected to result from the use of these assets.
Impairment losses are recognized when the sum of expected future cash flows
are less than the assets' carrying value.
9. Deferred Costs
Deferred costs primarily consist of deferred financing costs. Deferred
financing costs are amortized as interest expense over the life of the
related debt.
10. Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Under this method, deferred tax assets and
liabilities are determined based on differences between the financial
reporting and tax basis of assets and liabilities, and are measured using
the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
realized.
11. Minority Interest
Minority interest represents the interest of unit holders of TCTB, other
than the Company, in the net earnings and net equity of TCTB. The unit
6
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
holder minority interest is adjusted at the end of each period to reflect
the ownership at that time. The unit holder minority interest in TCTB was
approximately 28.7% at June 30, 2005.
12. Contingently Convertible Securities
The Company has outstanding Series A Preferred Stock ("Series A"), Series B
Preferred Stock ("Series B") and Series C Preferred Stock ("Series C")
whose terms enable the holder, under certain conditions, to convert such
securities into 1,349,764 shares of the Company's Common Stock as shown in
the following table.
Number of Number of Common
Series Shares Purchase Price Conversion Rate Shares
------ ------ -------------- --------------- ------
A 80,000 $ 2,000,000 $ 3.2444 616,447
B 50,000 500,000 3.2444 154,111
B 10,000 100,000 3.424 29,206
B 20,000 200,000 4.000 50,000
C 125,000 2,000,000 4.000 500,000
Conversion of Series A, Series B and Series C is at the option of the
holder thereof, at any time and from time to time, into such number of
fully paid and nonassessable shares of Common Stock as is determined by
dividing the original Series A, Series B and Series C issue price by the
conversion price in effect at the time of conversion. The contingently
convertible securities have not been included in the calculation of diluted
earnings per share where their effect is antidilutive.
13. Revenue and Cost Recognition
Leases with tenants are accounted for as operating leases. Minimum annual
rentals are recognized on a straight-line basis over the terms of the
respective leases. As of June 30, 2005, there were no deferred tenant
receivables.
The Company records electricity sales under the accrual method and these
revenues are recognized upon delivery of electricity to the customers'
meters. Electric services not billed by month-end are accrued based upon
estimated deliveries to customers as tracked and recorded by the Electric
Reliability Council of Texas ("ERCOT") multiplied by the Company's average
billing rate per kilowatt hour ("kwh") in effect at the time.
The flow technique of revenue calculation relies upon ERCOT settlement
statements to determine the estimated revenue for a given month. Supply
delivered to our customers for the month, measured on a daily basis,
provides the basis for revenues. ERCOT provides net electricity delivered
data in three frames. Initial daily settlements become available
approximately 17 days after the day being settled. Approximately 45 days
after the day being settled, a resettlement is provided to adjust the
initial settlement to the actual supply delivered based on subsequent
comparison of prior forecasts to actual meter reads processed. A final
resettlement is provided approximately 180 days after power is delivered,
marking the last routine settlement adjustment to the power deliveries for
that day.
7
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
Sales represent the total proceeds from energy sales, including pass
through charges from the TDSPs billed to the customer at cost. Cost of
goods and services ("COGS") include electric power purchased, sales
commissions, and pass through charges from the TDSPs in the areas serviced
by the Company. TDSP charges are costs for metering services and
maintenance of the electric grid. TDSP charges are determined by regulated
tariffs established by the Public Utility Commission of Texas ("PUCT").
Bilateral wholesale costs are incurred through contractual arrangements
with wholesale power suppliers for firm delivery of power at a fixed volume
and fixed price. The Company is typically invoiced for these wholesale
volumes at the end of each calendar month for the volumes purchased for
delivery during the month, with payment due 10 to 20 days after the end of
the month.
Balancing/ancillary costs are based on the aggregate customer load and are
determined by ERCOT through a multiple step settlement process. Balancing
costs/revenues are related to the differential between supply provided by
the Company through its bilateral wholesale supply and the supply required
to serve the Company's customer load. The Company endeavors to minimize the
amount of balancing/ancillary costs through its load forecasting and
forward purchasing programs.
14. Earnings Per Share
There were no preferred stock dividends for the periods ended June 30, 2005
or 2004. The effects of Series A, Series B and Series C convertible
Preferred Stock is not included in the computation of diluted earnings per
share for any periods in which their effect is antidilutive.
15. Environmental
The Company is subject to extensive federal, state and local environmental
laws and regulations. These laws regulate asbestos in buildings that
require the Company to remove or mitigate the environmental effects of the
disposal of the asbestos at the buildings.
Environmental costs that relate to current operations are expensed or
capitalized as appropriate. Costs are expensed when they relate to an
existing condition caused by past operations and will not contribute to
current or future revenue generation. Liabilities related to environmental
assessments and/or remedial efforts are accrued when property or services
are provided or can be reasonably estimated.
16. New Accounting Pronouncements
In December 2003, the Financial Accounting Standards Board (FASB) issued a
revised Interpretation No. 46, Consolidation of Variable Interest Entities,
replacing the original Interpretation issued in January 2003. The revised
Interpretation provides guidance on when certain entities should be
consolidated or the interests in those entities should be disclosed by
enterprises that do not control them through majority voting interest.
Under the revised Interpretation, entities are required to be consolidated
by enterprises that lack majority voting interest when equity investors of
those entities have insignificant capital at risk or they lack voting
rights, the obligation to absorb expected losses, or the right to receive
8
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
expected returns. Entities identified with these characteristics are called
variable interest entities and the interests that enterprises have in these
entities are called variable interests. These interests can derive from
certain guarantees, leases, loans or other arrangements that result in
risks and rewards that are disproportionate to the voting interests in the
entities. The provisions of the revised Interpretation must be immediately
applied for variable interest entities created after January 31, 2003 and
for variable interests in entities commonly referred to as "special purpose
entities." For all other variable interest entities, implementation is
required by March 31, 2004.
In July 2003, the FASB issued SFAS No. 149, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 149 amends and clarifies SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS
No. 149 improves financial reporting of derivatives by requiring contracts
with comparable characteristics be accounted for similarly. This Statement
also incorporates clarifications of the definition of a derivative. SFAS
No. 149 is effective for contracts entered into or modified after June 30,
2003. Management will consider the impact of this Statement on its
financial statements for future periods.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No.
150 requires that an issuer classify a financial instrument that is within
its scope as a liability. Many of those instruments were previously
classified as equity such as common or preferred shares that are
mandatorily redeemable-that embody an unconditional obligation requiring
the issuer to redeem the shares by transferring its assets at a specified
date or upon an event that is certain to occur. The provisions of this
Statement shall be effective for the first fiscal period beginning after
December 15, 2004.
In November 2004, the FASB issued SFAS No. 151, Inventory Costs. SFAS No.
151 amends the guidance in Accounting Research Bulletin (ARB) No. 43,
Chapter 4, Inventory Pricing, to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs and wasted
material (spoilage). This Statement requires that those items be recognized
as current-period charges regardless of whether they meet the criterion of
"so abnormal." In addition, the Statement requires that allocation of fixed
production overheads to the costs of conversion be based on the normal
capacity of the production facilities. The provisions of this Statement are
effective for inventory costs incurred during fiscal years beginning after
June 15, 2005, with early application encouraged.
In December 2004, the FASB issued Statement No. 123 (revised), Accounting
for Stock-Based Compensation. This Statement eliminates the alternative to
use Accounting Principles Board (APB) Opinion No. 25's intrinsic value
method of accounting. This Statement establishes standards for the
accounting for transactions in which an entity exchanges its equity
instruments for goods or services. It also addresses transactions in which
an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity's equity instruments or that may be
settled by the issuance of those instruments. An entity will measure the
cost of employee services received in exchange for an award of equity
instruments based on the grant date fair value of those instruments, except
in certain circumstances. The provisions of this interpretation become
effective as of the beginning of the first annual reporting period that
begins after December 15, 2005.
9
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
In December 2004, the FASB issued SFAS No. 152, Accounting for Real Estate
Time-Sharing Transactions. This Statement amends SFAS No. 66 and SFAS No.
67 to state the guidance for (a) incidental operations and (b) costs
incurred to sell real estate projects does not apply to real estate
time-sharing transactions. The accounting for those operations and costs is
subject to the guidance in Statement of Position (SOP) 04-2, Accounting for
Real Estate Time-Sharing Transactions. This Statement is effective for
financial statements for fiscal years beginning after June 15, 2005.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
Assets. This Statement amends APB Opinion No. 29, to eliminate the
exception for nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. The provisions of this Statement
shall be effective for nonmonetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005.
In May 2004, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections. This Statement replaces APB Opinion 20 and FASB Statement No.3
and changes the requirements for the accounting for and reporting of a
change in accounting principle. This Statement applies to all voluntary
changes in accounting principle. It also applies to changes required by an
accounting pronouncement in the unusual instance that the pronouncement
does not include specific transition provisions. When a pronouncement
includes specific transition provisions, those provisions should be
followed. The provisions of this Statement shall be effective for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005.
Management does not believe the new pronouncements will have a material
impact on its financial statements.
17. Reclassifications
Certain reclassifications of prior period amounts have been made to conform
to the 2005 presentation.
NOTE B - BUSINESS COMBINATIONS
In January 2004, the Company purchased an additional 6.485% limited
partnership interest in TCTB by issuing debt of $250,778 (see note L) and a
cash payment of $208,346. The allocation of the purchase price resulted in
the Company recording an increase in property, plant and equipment of
$269,843 and reducing the minority interest investment by $189,281.
NOTE C - ISSUANCE OF SERIES C PREFERRED STOCK
On February 3, 2005, the Company finalized an agreement involving a private
placement under Regulation D for the new Series C Preferred Stock and
common stock purchase warrants (the "Warrants") to accredited investors
(the "Purchase Agreement"). The Company closed the sale and issuance of
125,000 Series C Preferred Stock and 250,000 Warrants pursuant to the
Purchase Agreement, as amended by the Second Amendment (the "Amended
Purchase Agreement"), on March 1, 2005. The purchase price consisted of a
total of $2 million in cash and limited guaranties from the investors in
10
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
favor of Western National Bank covering the credit facility described in
Note L. No underwriting discounts or commissions were paid in connection
with this issuance. Certain facts related to the exemption from
registration of the issuance of the securities under securities law are set
forth in the Amended Purchase Agreement as representations of the
investors, including without limitation their investment intent, their
status as accredited investors, the information provided to them, the
restricted nature of the securities, and similar matters.
The Series C ranks equally to the Company's outstanding Series A and the
outstanding Series B and prior to the Common Stock, par value $.01 per
share, of the Company (the "Common Stock") upon liquidation of the Company.
The Series A, Series B, Series C and the Common Stock are equal as to the
payment of dividends. Each share of Series C is convertible into four
shares of Common Stock, for a total of 500,000 shares, subject to
adjustment pursuant to anti-dilution provisions. The Warrants are
exercisable into a total of 250,000 shares of Common Stock at an initial
exercise price of $4.00 (also subject to adjustment pursuant to
anti-dilution provisions), and expire three years from the date of
issuance.
NOTE D - CONCENTRATIONS OF CREDIT RISK
The Company maintains cash balances at three financial institutions, which
at times may exceed federally insured limits. At June 30, 2005, the Company
had approximately $2,566,361 of uninsured cash and cash equivalents. The
Company has not experienced any losses in such accounts and believes that
it is not exposed to any significant credit risks on such accounts.
The Company's revenues are derived principally from uncollateralized rents
from tenants and retail power customers. The concentration of credit risk
in two industries affects its overall exposure to credit risk because
tenants/customers may be similarly affected by changes in economic and
other conditions.
NOTE E - ROYALTY INTERESTS
In 2004, the Company, through its wholly-owned subsidiary Amen Minerals,
LP, completed the acquisition of two separate royalty interests, one in the
state of Texas and one in the state of Oklahoma. The total consideration
paid by the Company for the royalty interests was $162,854. Under
accounting principles generally accepted in the United States of America,
revenues and expenses are recognized on an accrual basis. Royalty income is
generally received one to two months following the month of production and
the Company used estimates to accrue royalty income for the quarters ended
June 30, 2005 and 2004.
NOTE F - CASH, CASH EQUIVALENTS AND INVESTMENTS
At June 30, 2005 the Company's cash and cash equivalents consist of cash in
banks of approximately $2,989,596.
11
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
Securities available-for-sale in the accompanying balance sheet at June 30,
2005 total $62,350. The aggregate market value, cost basis, and unrealized
gains and losses of securities available-for-sale, by major security type
as of June 30, 2005 are as follows:
Gross
Market Cost Unrealized
Value Basis Losses
------------- ------------- -------------
As of June 30, 2005:
Other securities $ 62,350 $ 62,350 $ -
============= ============ ============
NOTE G - RESTRICTED CERTIFICATE OF DEPOSIT
The Company holds a $2,100,000 certificate of deposit with a financial
institution which bears interest of 1.98% and matures on December 28, 2005.
The certificate of deposit collateralizes the term note with a financial
institution (see note L) and is restricted. The certificate of deposit is
recorded at cost, which approximates market value. The certificate is
non-negotiable and non-transferable, and may incur substantial penalties
for withdrawal prior to maturity.
NOTE H - NOTE RECEIVABLE
On December 13, 2002, the Company received a note receivable in the amount
of $275,000, with an annual interest rate of 6.00%, from a third-party for
the sale of substantially all assets associated with a direct mail
advertising service. The note receivable is due in quarterly installments,
beginning April 10, 2003, equal to 20% of the gross profit from operations
for the prior calendar quarter period, with all remaining unpaid principal
and interest due on January 10, 2010. As of June 30, 2005, the outstanding
principal balance on the note receivable was $241,555. Because the current
maturities are not reasonably estimable at June 30, 2005, the entire
principal balance is reported as non-current.
NOTE I - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, consisted of the following at June 30, 2005:
Buildings $ 8,447,862
Furniture, fixtures and equipment 114,190
Tenant improvements 563,781
Land 158,997
-------------
9,284,830
Less: accumulated depreciation (1,052,270)
-------------
$ 8,232,560
Depreciation expense for six months ended June 30, 2005 and 2004 was
$196,506, and $217,501, respectively.
12
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
NOTE J - ACCRUED LIABILITIES
Accrued liabilities consisted of the following at June 30, 2005:
Accrued property taxes $ 92,672
Accrued TDSP Charges 155,020
Other accrued liabilities 112,599
-------------
$ 360,291
NOTE K - OPERATING SEGMENTS
On July 30, 2004, the Company formed and initiated the development of
W Power. W Power was established to enter into the retail electricity
market in Texas. The formation of W Power resulted in the
diversification of the Company's business activities into two
reportable segments: real estate operations and a retail electricity
provider (REP). The real estate operations consist of two office
properties located in Midland, Texas and comprise an aggregate of
approximately 428,560 square feet of gross leaseable area. The REP
segment will sell electricity and provide the related billing,
customer service, collection and remittance services to both
residential and commercial customers.
Each segment's accounting policies are the same as those described in
the summary of significant accounting policies and the following
tables reflect totals for the three months ending June 30, 2005 and
2004, respectively.
Three months ended June 30, 2005:
---------------------------------
Inter-Company
Real Estate Other and Transaction Consolidated
REP Operations Corporate Eliminations Total
-------------------- ----------------- ------------- -------------- --------------
Revenues from external $ 1,125,596 $ 672,137 $ - $ - $ 1,797,733
customers
==================== ================= ============= ============== ==============
Revenues from other $ 177,295 $ 4,987 $ - $ (182,282) $ -
operating segments
==================== ================= ============= ============== ==============
Depreciation, amortization $ 1,778 $ 75,777 $ 27,116 $ - $ 104,671
and depletion
==================== ================= ============= ============== ==============
Interest expense $ 11,667 $ 168,477 $ 8,918 $ (40,913) $ 148,149
==================== ================= ============= ============== ==============
Segment net income (loss) $ (179,610) $ (14,766) $ (45,302) $ 28,340 $ (211,338)
==================== ================= ============= ============== ==============
Segment assets $ 1,664,153 $ 7,420,442 $ 6,828,318 $ (391,853) $ 15,521,060
==================== ================= ============= ============== ==============
Expenditures for segment $ 8,369 $ 51,959 $ 2,891 $ - $ 63,219
assets
==================== ================= ============= ============== ==============
13
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
Three months ended June 30, 2004:
---------------------------------
Inter-Company
Real Estate Other and Transaction Consolidated
REP Operations Corporate Eliminations Total
------------------ ----------------- ------------- -------------- --------------
Revenues from external $ - $ 1,073,582 $ - $ - $ 1,073,582
customers
================== ================= ============= ============== ==============
Revenues from other $ - $ - $ - $ - $ -
operating segments
================== ================= ============= ============== ==============
Depreciation, amortization $ - $ 81,241 $ 29,807 $ - $ 111,048
and depletion
================== ================= ============= ============== ==============
Interest expense $ - $ 115,190 $ 31,993 $ - $ 147,183
================== ================= ============= ============== ==============
Segment net income (loss) $ - $ 266,719 $ (237,626) $ - $ 29,093
================== ================= ============= ============== ==============
Segment assets $ - $ 10,213,890 $ 5,080,170 $ (166,870) $ 15,127,190
================== ================= ============= ============== ==============
Expenditures for segment $ - $ 3,994 $ 1,452 - $ 5,446
assets
================== ================= ============= ============== ==============
Six months ended June 30, 2005:
-------------------------------
Inter-Company
Real Estate Other and Transaction Consolidated
REP Operations Corporate Eliminations Total
-------------------- ----------------- ------------- -------------- --------------
Revenues from external $ 1,436,385 $ 1,342,319 $ - $ - $ 2,778,704
customers
==================== ================= ============= ============== ==============
Revenues from other $ 272,826 $ 13,300 $ - $ (286,126) $ -
operating segments
==================== ================= ============= ============== ==============
Depreciation, amortization $ 3,300 $ 138,762 $ 54,444 $ - $ 196,506
and depletion
==================== ================= ============= ============== ==============
Interest expense $ 22,895 $ 222,571 $ 91,184 $ (74,155) $ 262,495
==================== ================= ============= ============== ==============
Segment net income (loss) $ (264,627) $ 127,715 $ (215,232) $ (22,844) $ (374,988)
==================== ================= ============= ============== ==============
Segment assets $ 1,664,153 $ 7,420,442 $ 6,828,318 $ (391,853) $ 15,521,060
==================== ================= ============= ============== ==============
Expenditures for segment $ 15,495 $ 403,371 $ 5,482 $ - $ 424,348
assets
==================== ================= ============= ============== ==============
14
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
Six months ended June 30, 2004:
Inter-Company
Real Estate Other and Transaction Consolidated
REP Operations Corporate Eliminations Total
------------------ ----------------- ------------- -------------- --------------
Revenues from external $ - $ 2,147,882 $ - $ - $ 2,147,882
customers
================== ================= ============= ============== ==============
Revenues from other $ - $ - $ - $ - $ -
operating segments
================== ================= ============= ============== ==============
Depreciation, amortization $ - $ 162,143 $ 55,358 $ - $ 217,501
and depletion
================== ================= ============= ============== ==============
Interest expense $ - $ 229,978 $ 50,613 $ - $ 280,591
================== ================= ============= ============== ==============
Segment net income (loss) $ - $ 555,757 $ (434,058) $ - $ 121,699
================== ================= ============= ============== ==============
Segment assets $ - $ 10,213,890 $ 5,080,170 $ (166,870) $ 15,127,190
================== ================= ============= ============== ==============
Expenditures for segment $ - $ 27,587 $ 2,913 $ - $ 30,500
assets
================== ================= ============= ============== ==============
NOTE L - LONG-TERM OBLIGATIONS
On June 5, 2002, TCTB entered into a loan agreement (the "TCTB Note")
with a financial institution for a term note of $6,800,000. The term
note bears interest at a fixed rate per annum of 7.23%. TCTB is making
monthly payments of principal and interest in the amount of $53,663
for the term note until maturity of the note on May 31, 2009. The loan
agreement is secured by substantially all of the assets of TCTB. The
loan agreement restricts cash distributions to TCTB's owners. TCTB
shall not declare or pay any distributions in excess of tax liability
due annually (but in any event, no more than 40% of net income),
either in cash or any property to any owners. The loan agreement also
contains other customary conditions and events of default, the failure
to comply with, or occurrence of, would prevent any further borrowings
and would generally require the repayment of any outstanding
borrowings along with accrued interest under the loan agreement. Such
events of default include (a) non-payment of loan agreement debt and
interest thereon, (b) non-compliance with the terms of the credit
agreement covenants, (c) cross-default with other debt in certain
circumstances, (d) bankruptcy and (c) a final judgment or order for
the payment of money in excess of $100,000. Effective December 31,
2004, TCTB partners agreed to distribute its Lubbock, Texas office
building to the TCTB partners and simultaneously sell their interest
in the asset to an entity partially owned by certain TCTB minority
owners. The Lubbock building was subject to a lien securing TCTB's
note payable to Wells Fargo Bank Texas, N.A. The Bank agreed to
release its lien on the Lubbock building in exchange for a $2,100,000
restricted certificate of deposit (see note G) pledged by TCTB to the
Bank as additional collateral.
Delaware entered into nine promissory notes (the "Delaware Notes"),
certain of which are with related parties, in an aggregate amount of
$2,789,087, to purchase the 64.9% ownership interest in TCTB. The
notes are due in annual payments of principal and interest beginning
15
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
April 1, 2005 with a final maturity of May 31, 2009. The interest rate
is currently 4.9% and is adjusted each October 1 to equal the Wall
Street Journal Prime Lending Rate (4.75% at October 31, 2004) plus
.15%. The annual payments are equal to a set percentage, ranging from
1% to 16% of the future net operating loss benefit of the Company. The
net operating loss benefits are calculated as the dollar value of the
federal income tax benefit to the Company of the net operating loss
calculated in accordance with the Internal Revenue Code, for the
calendar year preceding the date of each annual payment. Due to the
distribution and sale of the Lubbock building on December 31, 2004,
the Company elected to forgo the payment as described above and paid
one half of the principal balance along with the entire accrued
interest balance during January 2005.
Delaware entered into a promissory note (the "Hexagon Note") in
January 2004 in the amount of $250,778 to purchase an additional
6.485% ownership interest in TCTB. The note is due in quarterly
installments of principal and interest beginning on March 1, 2004 with
a final maturity of January 1, 2010. The term note bears interest at a
fixed rate per annum of 5%.
On February 28, 2005 the Company entered into a loan agreement (the
"WNB Note") with Western National Bank, Midland, Texas. The Note is a
certain Revolving Line of Credit in an amount of $5,000,000. Under the
Note, the Bank may, but is not obligated to advance more than
$2,500,000. Borrowings under the Note are subject to a borrowing base
equal to the lesser amount of: (a) $5,000,000 or (b) seventy-five
percent (75%) of the eligible customer receivables of the Company and
its subsidiary W Power. The Note bears a variable interest rate equal
to the Prime Rate, defined as the prime rate in the money rate table
of The Wall Street Journal, a Dow Jones publication, as of each
business day (6.25% at June 30, 2005). Interest is computed on the
unpaid principal balance of the Note and is due and payable as it
accrues monthly, commencing March 31, 2005, and thereafter on the last
day of each and every succeeding month until maturity, March 31, 2008,
when the entire amount of the Note, principal and accrued, unpaid
interest, shall be due and payable. The Note is secured by a security
agreement to all of the accounts receivable of W Power. In addition,
the Note is guaranteed by certain accredited investors which
guarantees are partially secured by letters of credit. The loan
agreement also contains other customary conditions and events of
default, the failure to comply with, or occurrence of, would prevent
any further borrowings and would generally require the repayment of
any outstanding borrowings along with accrued interest under the loan
agreement. The proceeds from the Note are intended to be used to fund
potential capital requirements in order to facilitate the growth of
the Company's retail electric provider subsidiary, W Power, and for
general corporate purposes.
Long-term debt as of June 30, 2005:
Long-term Current
Portion Portion Total
---------------- ------------ --------------
TCTB Note $ 5,797,231 $ 210,528 $ 6,007,759
Delaware Notes 1,394,543 - 1,394,543
Hexagon Note 155,283 39,627 194,910
WNB Note - - -
---------------- ------------ --------------
Total $ 7,347,057 $ 250,155 $ 7,597,212
================ ============ ==============
16
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
Maturities of long-term debt at June 30, 2005 are as follows:
2005 $ 250,155
2006 268,136
2007 286,311
2008 5,374,160
2009 1,418,450
------------
Total 7,597,212
Less current portion 250,155
------------
Long-term portion $ 7,347,057
=============
NOTE M - RELATED PARTY TRANSACTIONS
At June 30, 2005 and 2004, related parties leased from TCTB, office
space of approximately 32,000 and 29,000 square feet, respectively.
TCTB received rental income from these related parties of
approximately $72,521 and $65,361 during the three months then ended,
respectively, and $147,800 and $132,617 during the six months then
ended, respectively.
Prior to Amen Properties, Inc. acquiring a limited partnership
interest in TCTB, TCTB had entered into an agreement with Priority
Power Management, Ltd to provide aggregation and consulting services
in the management of TCTB's electricity use and costs. This agreement
expired on December 31, 2004. The Company's Chief Operating Officer
has an indirect 18% ownership in Priority Power Management, Ltd.
During January 2005, TCTB began purchasing electricity through W
Power.
During 2004, the Company, through its subsidiary Minerals, purchased a
percentage of two certain royalty interests with certain individuals
and related parties acquiring the remaining percentages. Effective
April 1, 2004, the Company purchased a 25% interest in a Texas oil and
gas royalty for a purchase price of $102,519 along with the Chief
Operating Officer directly acquiring a 10.625% interest and the Chief
Executive Officer indirectly acquiring 22.5% interest. Effective April
2, 2004 the Company purchased a 20% interest in an Oklahoma oil and
gas royalty for a purchase price of $60,335 along with the Chief
Operating Officer directly acquiring a 8.5% interest and the Chief
Executive Officer acquiring an indirect 20% interest (see note E).
The Company closed the sale and issuance of 125,000 shares of Series C
Preferred Stock and 250,000 Warrants (see note C) pursuant to a
Purchase Agreement, as amended by the Second Amendment on March 1,
2005 between the Company and certain accredited investors, including
the Company's President and Chief Operating Officer, Jon M. Morgan,
the Company's Chief Executive Officer, Eric Oliver and Bruce
Edgington, one of the Company's Directors.
The following table reflects the Series C issuance to the Company's
Officers and Directors.
17
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2005
(Unaudited)
Number of Common Preferred C
Preferred C Stock Voting Purchase
Shares Equivalent Equivalent Price
--------------- ----------------- ---------------- -------------
Eric Oliver 14,063 56,252 52,877 $ 225,008
Jon M. Morgan 14,062 56,248 52,873 224,992
Bruce Edgington 3,125 12,500 11,750 50,000
--------------- ----------------- ---------------- -------------
Total 31,250 125,000 117,500 $ 500,000
=============== ================= ================ =============
The following table reflects the issuance of Warrants to the Company's
Officers and Directors.
Number of Common
Warrants Equivalent
--------------- -----------------
Eric Oliver 28,126 28,126
Jon M. Morgan 28,124 28,124
Bruce Edgington 6,250 6,250
--------------- -----------------
Total 62,500 62,500
=============== =================
NOTE N - COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is subject to claims and lawsuits which arise primarily in
the ordinary course of business. It is the opinion of management that
the disposition or ultimate resolution of such claims and lawsuits
will not have a material adverse effect on the consolidated financial
position of the Company.
Power Purchase Contracts
Certain contracts to purchase electricity provide for capacity
payments to ensure availability and provide for adjustments based on
the actual power taken under the contracts. Expected future capacity
payments under existing agreements are estimated as follows:
2005 $ 1,761,119
2006 965,474
2007 684,604
2008 148,960
2009 -
-------------
Total $ 3,560,157
=============
18
ITEM 2. Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction with the
Company's unaudited consolidated financial statements and related footnotes
presented in Item 1 and the Company's December 31, 2004 Form 10-KSB.
Overview
AMEN Properties, Inc., (the "Company") is a real estate and energy company
engaged in owning and managing real estate, oil and gas royalties, and energy
related business properties. The Company is a holding company and conducts its
operations through Amen Delaware, LP ("Delaware"); Amen Minerals, LP
("Minerals") and W Power and Light, LP ("W Power"), each being a wholly owned
subsidiary of the Company. The Company owns its present real estate holdings
through Delaware. Delaware owns an approximate 71.35% limited interest in TCTB
Partners, Ltd., which currently owns two commercial office buildings in Midland,
TX. The Company's present oil and gas royalty holdings are through Minerals,
which owns two oil and gas royalty properties, one in Nowata County, Oklahoma
and the other in Hemphill County, Texas. In July 2004, the Company entered the
retail electricity market as a retail electric provider serving both retail and
wholesale customers within the state of Texas through W Power.
Application of Critical Accounting Policies
Our discussion and analysis of financial condition and results of operations is
based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, and
contingencies as of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. We evaluate our
assumptions and estimates on an ongoing basis. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. These estimates form the basis for making
judgments about the carrying values of assets and liabilities where that
information is available from other sources. Certain estimates are particularly
sensitive due to their significance to the financial statements. Actual results
may differ significantly from management's estimates.
We believe that the most significant accounting policies that involve the use of
estimates and assumptions as to future uncertainties and, therefore, may result
in actual amounts that differ from estimates are the following:
- Acquisition of operating properties,
- Revenue and cost recognition,
- Allowance for doubtful accounts
Acquisition of Operating Properties
-----------------------------------
We allocate the purchase price of acquired properties to tangible and identified
intangible assets acquired based on their fair values in accordance with SFAS
19
No. 141, "Business Combinations." We initially record the allocation based on a
preliminary purchase price allocation with adjustments recorded within one year
of the acquisition.
In making estimates of fair value for purposes of allocating purchase price,
management utilizes sources, including, but not limited to, independent value
consulting services, independent appraisals that may be obtained in connection
with financing the respective property, and other market data. Management also
considers information obtained about each property as a result of its
pre-acquisition due diligence, marketing and leasing activities in estimating
the fair value of the tangible and intangible assets acquired.
The aggregate value of the tangible assets acquired is measured based on the sum
of (i) the value of the property and (ii) the present value of the amortized
in-place tenant improvement allowances over the remaining term of each lease.
Management's estimates of the value of the property are made using models
similar to those used by independent appraisers. Factors considered by
management in its analysis include an estimate of carrying costs such as real
estate taxes, insurance, and other operating expenses and estimates of lost
rentals during the expected lease-up period assuming current market conditions.
The value of the property is then allocated among building, land, site
improvements, and equipment. The value of tenant improvements is separately
estimated due to the different depreciable lives.
The aggregate value of intangible assets acquired is measured based on the
difference between (i) the purchase price and (ii) the value of the tangible
assets acquired as defined above. This value is then allocated among
above-market and below-market in-place lease values, costs to execute similar
leases (including leasing commissions, legal expenses and other related
expenses), in-place lease values and customer relationship values.
Above-market and below-market in-place lease values for acquired properties are
calculated based on the present value (using a market interest rate which
reflects the risks associated with the leases acquired) of the difference
between (i) the contractual amounts to be paid pursuant to the in-place leases
and (ii) management's estimate of fair market lease rates for the corresponding
in-place leases, measured over a period equal to the remaining non-cancelable
term of the lease for above-market leases and the initial term plus the term of
the below-market fixed rate renewal option, if any, for below-market leases. We
perform this analysis on a lease by lease basis. The capitalized above-market
lease values are amortized as a reduction to rental income over the remaining
non-cancelable terms of the respective leases. The capitalized below-market
lease values are amortized as an increase to rental income over the initial term
plus the term of the below-market fixed rate renewal option, if any, of the
respective leases.
Management estimates costs to execute leases similar to those acquired at the
property at acquisition based on current market conditions. These costs are
recorded based on the present value of the amortized in-place leasing costs on a
lease by lease basis over the remaining term of each lease.
The in-place lease values and customer relationship values are based on
management's evaluation of the specific characteristics of each customer's lease
and our overall relationship with that respective customer. Characteristics
considered by management in allocating these values include the nature and
extent of our existing business relationships with the customer, growth
prospects for developing new business with the customer, the customer's credit
20
quality, and the expectation of lease renewals, among other factors. The
in-place lease value and customer relationship value are both amortized to
expense over the initial term of the respective leases and projected renewal
periods, but in no event does the amortization period for the intangible assets
exceed the remaining depreciable life of the building.
Should a tenant terminate its lease, the unamortized portion of the in-place
lease value and the customer relationship value and above-market and
below-market lease values would be charged to expense.
Revenue and Cost Recognition
----------------------------
Leases with tenants are accounted for as operating leases. Minimum annual
rentals are recognized on a straight-line basis over the terms of the respective
leases. As of June 30, 2005 there were no such deferred tenant receivables.
The Company records electricity sales under the accrual method and these
revenues are recognized upon delivery of electricity to the customers' meters.
Electric services not billed by month-end are accrued based upon estimated
deliveries to customers as tracked and recorded by the Electric Reliability
Council of Texas ("ERCOT") multiplied by the Company's average billing rate per
kilowatt hour ("kwh") in effect at the time.
The flow technique of revenue calculation relies upon ERCOT settlement
statements to determine the estimated revenue for a given month. Supply
delivered to our customers for the month, measured on a daily basis, provides
the basis for revenues. ERCOT provides net electricity delivered data in three
frames. Initial daily settlements become available approximately 17 days after
the day being settled. Approximately 45 days after the day being settled, a
resettlement is provided to adjust the initial settlement to the actual supply
delivered based on subsequent comparison of prior forecasts to actual meter
reads processed. A final resettlement is provided approximately 180 days after
power is delivered, marking the last routine settlement adjustment to the power
deliveries for that day.
Because flow data for resettlements and final resettlements are not available in
sufficient time to be booked to the appropriate period, the effect of such
resettlements are booked in the month in which the cost of goods sold ("COGS")
effect of those resettlements are realized.
Sales represent the total proceeds from energy sales, including pass through
charges from the TDSPs billed to the customer at cost. COGS include electric
power purchased, sales commissions, and pass through charges from the TDSPs in
the areas serviced by the Company. TDSP charges are costs for metering services
and maintenance of the electric grid. TDSP charges are determined by regulated
tariffs established by the Public Utility Commission of Texas ("PUCT").
Allowance for Doubtful Accounts
-------------------------------
Management regularly reviews tenant accounts receivable and estimates the
necessary amounts to be recorded as an allowance for uncollectibility. These
reserves are established on a tenant-specific basis and are based upon, among
other factors, the period of time an amount is past due and the financial
condition of the obligor.
21
At the end of each quarter, revenue is accrued to unbilled receivables based on
the estimated amount of power delivered to customers using the flow technique.
Unbilled revenue also includes accruals for estimated Transmission and
Distribution Service Provider ("TDSP") charges and monthly service charges
applicable to the estimated usage for the period.
All charges that were physically billed to customers in the calendar month are
recorded from the unbilled account to the customer receivables account. Accounts
receivables are customer obligations billed at the conclusion of a month's
electricity usage and due within 15 days of the date of the invoice. Balances
past due are subject to a late fee that is assessed on the succeeding month's
billing.
The large number of customers and significant volume of transactions create a
challenge to manage receivables as well as to estimate the account balances that
ultimately will not be paid by the customers ("bad debt write-offs). The Company
uses a variety of tools to estimate and provide an accurate and adequate
allowance for doubtful accounts reserve; the allowance for doubtful accounts is
expensed each month as a percentage of revenue based on the historical bad debt
write-off trends that will result from that month's gross revenues.
Results of Operations
Overview
--------
For the six months ended June 30, 2005 the Company generated a net loss of
$374,988 or a net loss $.17 per share as compared to net income of $121,699, or
net income of $.06 per share for the same period ended June 30, 2004 for a net
decrease of $496,687. This decrease is mainly due to the Company's newly
created, wholly owned subsidiary W Power and the sale of the Company's undivided
interest in a commercial real estate property in Lubbock, Texas on December 31,
2004. For the six months ending June 30, 2005, the operations of W Power
incurred a net operating loss of approximately $265,000. This loss is mainly due
to W Power's general and administrative costs and a decrease in W Power's gross
profit margin due to an increase of balancing costs that are based on the
aggregate customer load and are determined by ERCOT through a multiple step
settlement process. Balancing costs/revenues are related to the differential
between the supply provided by the company through its bilateral wholesale
supply and the supply required to serve the Company's customer load. The sale of
the Company's undivided interest in a commercial real estate property in
Lubbock, Texas on December 31, 2004, reduced the Company's income from its
limited partnership interest in TCTB for the six months ending June 30, 2005 as
compared to June 30, 2004 by approximately $428,000 (approximately $305,000, net
to the Company's interest in TCTB of 71.348%). During the six months ending June
30, 2005 the Company, through its investments in Minerals showed an increase of
approximately $21,000 in royalty income over the same period ending June 30,
2004. Additionally, the Company has been working on an appropriate method in
which to compensate the Board of Directors. At the end of 2004 the Company made
an accrual to compensate the Board with the issuance of restricted stock in the
amount of approximately $33,000. The Board has elected to forego the restricted
stock compensation for 2004 and intends on compensating the Board with the
issuance of stock options.
Revenues
--------
For the three months ended June 30, 2005
22
For the three months ended June 30, 2005 the Company experienced a decline in
rental revenue of approximately $400,000 as compared to the same period ending
June 30, 2004. The decline in rental revenue is the result of the sale and
distribution of the Lubbock building on December 31, 2004. Due to W Power not
being in operations during the three months ended June 30, 2004, comparative
information is not available. For the three months ended June 30, 2005 as
compared the three months ended March 31, 2005, retail electricity revenue
increased approximately $815,000. This increase is mainly due to W Power
acquiring approximately 1,000 new meters during the middle of May 2005.
For the six months ended June 30, 2005
For the six months ended June 30, 2005 the Company experienced a decline in
rental revenue of approximately $805,000 as compared to the same period ending
June 30, 2004. This decline is due to the sale and distribution of the Lubbock
building on December 31, 2004. Due to W Power not being in operations during the
six months ended June 30, 2004, comparative information is not available.
Operating expenses
------------------
For the three months ended June 30, 2005
Total operating expenses for the quarters ended June 30, 2005 and 2004 were
$1,924,424 and $839,083, respectively. The increase of approximately 1,085,000
in operating expense is mainly related to W Power's purchase of wholesale
electricity of approximately $1,144,000, which is partially offset by the
decrease in the rental property operations due to the sale and distribution of
the Lubbock building on December 31, 2004.
W Power's cost of goods and services were $1,143,727 or approximately 102% of
retail sales for the period ending June 30, 2005. This decrease in gross profits
is mainly due to rapid increases in the costs of wholesale power and ERCOT
balancing energy. Balancing costs/revenues are related to the difference between
the energy provided by the company through its bilateral wholesale contracts and
the energy required to serve the Company's aggregate customer load, as
determined by ERCOT through a multiple step settlement process. The balancing
market is a real-time spot market operated by ERCOT in order to match aggregate
customer load to system generation. For the quarter, W Power purchased
approximately 8% of its energy volume from the balancing market. Currently, W
Power plans to increase the amount of energy purchased through the balancing
market due to expensive summer wholesale generation prices which, due to the
current intra-day balancing market price volatility, results in significant
added expense to W Power's balancing energy costs even if W Power has purchased
a net of zero energy from the balancing market for a particular day or month. W
Power will require both customer growth and possibly a dynamic bilateral supply
agreement in order to decrease the amount of wholesale electricity purchased
from the balancing market as a percentage of its total power purchases. Due to W
Power not being in operations during the three months ended June 30, 2004,
comparative information is not available.
Rental property operations and depreciation expense decreased approximately
$133,000 and $6,400, respectively, for the three months ending June 30, 2005 as
compared to June 30, 2004. The decrease for property operations is attributable
23
to the sale of the commercial real estate building in Lubbock, Texas on December
31, 2004. The decrease in depreciation expense is also attributable to the sale
of the commercial real estate building in Lubbock, Texas but is partially offset
for the three months ended June 30, 2005 by the additional depreciation
associated with buildout cost incurred by TCTB during the first quarter of 2005.
For the three months ended June 30, 2005 as compared to the same period ending
June 30, 2004, general and administrative costs increased approximately $80,600.
This increase is due to W Power beginning operations in January 2005 and is
partially offset by the sale of the commercial real estate building in Lubbock,
Texas.
For the six months ended June 30, 2005
Total operating expense for the six months ended June 30, 2005 as compared to
same period ended June 30, 2004 increased approximately $1,284,000. This
increase is mainly related to W Power's purchase of wholesale electricity of
approximately $1,423,000, which is partially offset by the decrease in rental
property operations due to the sale of the commercial real estate building in
Lubbock, Texas on December 31, 2004.
W Power's cost of goods and services were $1,423,375 or approximately 99% of
retail electricity sales for the six months ended June 30, 2005. W Power's gross
profit was approximately $13,000 or approximately 1% of retail electricity sales
for the six months ending June 30, 2005. Due to W Power not being in operations
during the six months ended June 30, 2004, comparative information is not
available. Due to the increase in the balancing costs/revenues that are related
to the differential between the supply provided by the company through its
bilateral wholesale supply and the supply required to serve the Company's
customer load during the three months ended June 30, 2005, W Power experienced a
decline in its gross profit of approximately 90% during the three months ended
June 30, 2005.
Rental property operations and depreciation expense decreased approximately
$292,000 and $21,000 respectively, for the six months ending June 30, 2005 as
compared to six months ended June 30, 2004. The decrease for property operations
is attributable to the sale of the commercial real estate building in Lubbock,
Texas on December 31, 2004. The decrease in depreciation expense is also
attributable to the sale of the commercial real estate building in Lubbock,
Texas but is partially offset for the six months ended June 30, 2005 by the
additional depreciation associated with buildout cost incurred by TCTB during
the first quarter of 2005.
For the six months ended June 30, 2005 as compared to the same period ending
June 30, 2004, general and administrative costs increased approximately 173,000.
This increase is due to W Power beginning operations in January 2005.
Other (expense) income
----------------------
For the three months ended June 30, 2005
For the three months ended June 30, 2005, the company experienced an increase of
approximately $13,000 in interest income as compared to the three months ended
June 30, 2004. This increase in mainly due to the interest income the Company
received on the $2,100,000 certificated of deposit with the Wells Fargo, Bank,
24
N.A. This certificate of deposit is pledged by TCTB to the Bank as additional
collateral for the Bank's agreement to release its lien on the commercial real
estate building in Lubbock, Texas in order for TCTB to distribute and sell the
Lubbock building on December 31, 2004.
For the three months ended June 30, 2005 and 2004 the Company incurred a net
change in other expense of approximately $28,000. This change is mainly related
to the Company's Board foregoing the 2004 restricted stock compensation accrued
on December 31, 2004 in the amount of approximately $33,000. The Board intends
to begin using the issuance of stock options as compensation for the Board of
Directors.
For the six months ended June 30, 2005
For the six months ended June 30, 2005 as compared to the same period ended June
30, 2004, the Company experienced an increase of approximately $21,500 in
interest income. This increase is mainly due to the interest income the Company
received on the $2,100,000 certificate of deposit with Wells Fargo, Bank N.A.
For the six months ended June 30, 2005 and 2004 the Company experienced a net
decrease in other income of approximately $6,500. The decrease in mainly
associated with the Company expensing all legal expenses related to the issuance
of the Company's Series C Preferred Stock during the first quarter of 2005 which
is partially offset with the Company's Board foregoing the 2004 restricted stock
compensation accrued on December 31, 2004 in the amount of approximately
$33,000. The Board intends to begin using the issuance of stock options as
compensation for the Board of Directors.
Minority interest
-----------------
For the three months ended June 30, 2005
Minority interest income (expense) for the three months ended June 30, 2005 and
2004 was $4,231 and $(76,420), respectively, and reflects the minority interest
owners of TCTB. The decrease in minority interest is related to the Company's
purchase of an additional 6.485533% interest in TCTB effective January 1, 2004
and the decrease in income at TCTB due to sale of the commercial real estate
building in Lubbock, Texas on December 31, 2004.
For the six months ended June 30, 2005
For the six months ended June 30, 2005 minority interest expense decreased
approximately $123,000. This decrease in minority interest expense is mainly due
to the sale of the commercial real estate building in Lubbock, Texas on December
31, 2004.
Liquidity and capital resources
-------------------------------
Though we have not abandoned the 2003 business model, our focus is to support W
Power for the immediate future. Our immediate objectives are to actively monitor
TCTB, assess opportunities as they present themselves, and support W Power in
building a strong customer base.
25
As a retail electric provider, W Power will have to focus on its credit needs
over the next 12 to 18 months and the need to reduce its balancing costs. As
with any exponential growth business model, W Power is also attempting to manage
its growth prudently. We must also continue incremental development of our
computing systems and business processes to minimize the time and effort
associated with performing certain core retail electric provider business
activities such as pricing, contracting, scheduling, and billing. With
efficiency in these processes, strong internal controls and procedures, and
sufficient credit, W Power will accelerate its acquisition of customers through
aggressive marketing and sales efforts later this year. We think maintaining
sufficient credit availability and managing gross profit margins in a
hyper-growth business model are the two biggest risks facing W Power. W Power
hopes to achieve break even by the fourth quarter of this year. We are confident
W Power can attain its market share benchmarks during 2005.
Though we think 2005 will be a banner year in regards to building intrinsic
value with the development of the brand and customer base of W Power, we are not
as optimistic with regards to projected earnings. With the absence of our
Lubbock building and with the majority of the year dedicated to establishing W
Power, we anticipate negative to neutral earnings this year in our quest to
finalize this start up phase.
During the six months ended June 30, 2005 and 2004 net cash (used in) provided
by operating activities was $(1,228,079) and $384,263, respectively. The net
decrease of approximately $1,612,342 used in operating activities is related to
several items. During the six months ended June 30, 2005 the Company paid the
balance, approximately $286,800, of accrued interest on the nine promissory
notes, certain of which are related parties, entered into by Delaware in October
2002 to purchase the original 64.9% ownership in TCTB. During the six months
ended June 30, 2005 the Company incurred additional cash outlays of
approximately $634,500 for the required collateral deposits with W Power's
wholesale electricity providers and ERCOT. The remaining decrease in net cash
provided by operating activities is due to the operating expenses associated
with W Power and a decline in net operating cash provided by the Company's
limited partnership interest in TCTB due to the sale of the commercial real
estate building in Lubbock, Texas on December 31, 2004.
Net cash used in investing activities was $416,348 and $346,144 for the six
months ended June 30, 2005 and 2004, respectively. For the six months ending
June 30, 2005 the Company used approximately $424,000 on remodeling lease space
for new tenants which was approximately $394,000 more than the six months ended
June 30, 2004. During the six months ending June 30, 2005 the Company did not
purchase or sale any investments.
Net cash provided by (used in) financing activities was $486,123 and $(230,930)
for the six months ended June 30, 2005 and 2004, respectively, for a net change
of approximately $717,000. During the six months ended June 30, 2005, the
Company paid approximately $1,395,000 representing one half of the outstanding
principal balance on the nine promissory notes entered into by Delaware in
October 2002 to purchase the original 64.9% limited interest in TCTB.
Additionally, the Company received $2,000,000 from the issuance of the Company's
Series C Preferred Stock on March 1, 2005. During the six months ended June 30,
2004, minority interest distributions were $129,905 and were related to the
minority interest owners in TCTB. For the six months ended June 30, 2005,
minority interest owners in TCTB did not receive a distribution.
26
Currently, the Company has a net operating tax loss ("NOL") carry forward in
excess of $29 million. This NOL is related to the Company's operations prior to
the Company presenting the 2002 business plan to shareholders. Management
believes the present value of this NOL is between $2.5 and $5 million and has
been diligent in its efforts to ensure its preservation and utilization.
ITEM 3. Controls and Procedures
The Company has carried out an evaluation under the supervision of management,
including the Chairman and Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based on that evaluation, the Company's
Chairman and Chief Executive Officer and Chief Financial Officer have concluded
that, as of June 30, 2005, except as discussed below with respect to internal
control over financial reporting, the Company's disclosure controls and
procedures were effective to ensure that information required to be disclosed by
the Company in the reports filed or submitted by it under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC,
and include controls and procedures designed to ensure that information required
to be disclosed by the Company in such reports is assembled and reported to the
Company's management, including the Chairman and Chief Executive Officer and the
Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosures.
There have not been changes in internal control over financial reporting during
the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting. Management has identified and has reported to the Audit
Committee of the Company's Board of Directors certain matters involving internal
control deficiencies. The deficiencies noted were (a) a lack of documented
control procedures (b) the lack of segregation of duties and (c) insufficient
supervision of the Company's accounting personnel. The Company believes such
deficiencies were primarily attributable to the transition the Company went
through during the end of 2002 and 2003, changes in personnel within the
accounting department, the growth and development of the Company's new start up
subsidiary W Power, and the Company currently having only one full time employee
at the corporate level. Except as noted above the Company believes that its
internal control over financial reporting are sufficient to provide reasonable
assurance that the consolidated financial statements are fairly presented in
conformity with accounting principles generally accepted in the United States of
America.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
27
Information related to this Item has been previously included in Current Reports
on Form 8-K filed during the period covered by this Report.
ITEM 3. Defaults Upon Senior Securities
None to report.
ITEM 4. Submission of Matters to a Vote of Security Holders
On May 26, 2005, the Company held its annual meeting of shareholders. At the
meeting, the following proposals were voted upon by the Company's shareholders.
At the record date, March 15, 2005, there were 2,201,356 shares of common stock
isuued; 616,447 common equivalent of Preferred A with a voting equivalent of
333,333 common shares; 233,317 common equivalent of Preferred B with a voting
equivalent of 233,317; and 440,271 common equivalent of Preferred C with a
voting equivalent of 440,271. A total of 3,208,278 voting shares and 2,996,401
(93.39%) of the shares, which represents the necessary quorum, voted on the
proposals.
Proposal I: To elect the following nominees as directors:
It was proposed that six members be elected at the meeting to the Board of
Directors.
------------------------------------- -------------- ------------- --------------- -------------- -----------
Proposal I Percentage Percentage
of Votes of Votes
For Cast Against Cast Abstain
------------------------------------- -------------- ------------- --------------- -------------- -----------
Eric Oliver 2,982,088 99.52% 14,313 .48% -
------------------------------------- -------------- ------------- --------------- -------------- -----------
Jon M. Morgan 2,982,088 99.52% 14,313 .48% -
------------------------------------- -------------- ------------- --------------- -------------- -----------
Bruce E. Edgington 2,982,088 99.52% 14,313 .48% -
------------------------------------- -------------- ------------- --------------- -------------- -----------
Earl E. Gjelde 2,982,088 99.52% 14,313 .48% -
------------------------------------- -------------- ------------- --------------- -------------- -----------
Donald M. Blake Jr. 2,982,088 99.52% 14,313 .48% -
------------------------------------- -------------- ------------- --------------- -------------- -----------
G. Randy Nicholson 2,982,088 99.52% 14,313 .48% -
------------------------------------- -------------- ------------- --------------- -------------- -----------
Proposal II: Approval of the issuance and sale of the Series C Preferred Stock
and Common Stock Warrants by the Company and the potential issuance of shares or
common stock upon conversion or exercise of such securities.
------------------------ ------------ -------------- ------------- --------------- -------------- -----------
Total Percentage Percentage
Voting of Votes of Votes
Shares For Cast Against Cast Abstain
------------------------ ------------ -------------- ------------- --------------- -------------- -----------
Proposal II 1,453,254 1,436,519 98.85% 14,333 .99% 2,402
------------------------ ------------ -------------- ------------- --------------- -------------- -----------
Proposal III: Amendment to the Certificate of Incorporation effecting the
Certificate of Designation of Series and Determination of Rights and Preferences
of the Series A Preferred Stock of Amen Properties, Inc.
------------------------ ------------ -------------- ------------- --------------- -------------- -----------
Total Percentage Percentage
Voting of Votes of Votes
Shares For Cast Against Cast Abstain
------------------------ ------------ -------------- ------------- --------------- -------------- -----------
Proposal III 3,208,278 1,874,973 58.44% 15,436 .48% 3,116
------------------------ ------------ -------------- ------------- --------------- -------------- -----------
28
Proposal IV: Amendment to the Certificate of Incorporation effecting the
Certificate of Designation of Series and Determination of rights and Preferences
of the Series B Convertible Preferred Stock of Amen Properties, Inc.
------------------------ ------------ -------------- ------------- --------------- -------------- -----------
Total Percentage Percentage
Voting of Votes of Votes
Shares For Cast Against Cast Abstain
------------------------ ------------ -------------- ------------- --------------- -------------- -----------
Proposal IV 3,208,278 1,874,448 58.43% 16,061 .5% 3,016
------------------------ ------------ -------------- ------------- --------------- -------------- -----------
ITEM 5. Other Information
None to report.
ITEM 6. Exhibits
(a) EXHIBITS:
Exhibit
Number Description
------ -----------
3.1 Certificate of Designation of Series and Determination of
Rights and Preferences of Series C Convertible Preferred
Stock of Amen Properties, Inc. (Incorporated by reference to
the Company's Report on Form 8-K filed with the Securities
and Exchange Commission on March 4, 2005).
4.1 Form of Warrant Certificate dated March 1, 2005
(Incorporated by reference to the Company's Report on Form
8-K filed with the Secrurities and Exchange Commission on
March 4, 2005).
10.1 Consent, Waiver and Amendment of the holders of Series A
Preferred Stock dated January 2005 (identical copy executed
by each holder) (Incorporated by reference to the Company's
Report on Form 10-KSB filed with the Securities and Exchange
Commission on March 31, 2005).
10.2 Consent, Waiver and Amendment of the holders of Series B
Preferred Stock dated January 2005 (identical copy executed
by each holder) (Incorporated by reference to the Company's
Report on Form 10-KSB filed with the Securities and Exchange
Commission on March 31, 2005).
10.3 Securities Purchase Agreement between the Company and
certain investors dated January 18, 2005, as amended by a
First Amendment dated January 28, 2005 and a Second
Amendment dated February 28, 2005 (Incorporated by reference
to the Company's Report on Form 8-K filed with the
Securities and Exchange Commission on March 4, 2005)
10.4 Loan Agreement Between Amen Properties, Inc. and Western
National Bank (Incorporated by reference to the Company's
Report on Form 8-K filed with the Securities and Exchange
Commission on March 4, 2005).
29
10.5 Western National Bank Revolving Line of Credit Note
(Incorporated by reference to the Company's Report on Form
8-K filed with the Securities and Exchange Commission on
March 4, 2005).
11 Computation of Earnings Per Share
31.1 Certification of Chief Executive Officer.
31.2 Certification of Chief Financial Officer.
32.1 Certification of Chief Executive Officer Pursuant to 18 USC
ss. 1350.
32.2 Certification of Chief Financial Officer Pursuant to 18 USC
ss. 1350.
99.1 Press release Second Quarter 2005 Form 10-QSB
30
SIGNATURES
In accordance with the requirements of Securities Act of 1934, AMEN Properties,
Inc., the registrant, has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMEN Properties, Inc.
August 12, 2005 By:/s/ Eric Oliver
---------------
Eric Oliver
Chairman and Chief Executive Officer
August 12, 2005 By:/s/ John M. James
-----------------
John M. James
Chief Financial Officer and Secretary
31
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
3.1 Certificate of Designation of Series and Determination of
Rights and Preferences of Series C Convertible Preferred
Stock of Amen Properties, Inc. (Incorporated by reference to
the Company's Report on Form 8-K filed with the Securities
and Exchange Commission on March 4, 2005).
4.1 Form of Warrant Certificate dated March 1, 2005
(Incorporated by reference to the Company's Report on Form
8-K filed with the Secrurities and Exchange Commission on
March 4, 2005).
10.1 Consent, Waiver and Amendment of the holders of Series A
Preferred Stock dated January 2005 (identical copy executed
by each holder) (Incorporated by reference to the Company's
Report on Form 10-KSB filed with the Securities and Exchange
Commission on March 31, 2005).
10.2 Consent, Waiver and Amendment of the holders of Series B
Preferred Stock dated January 2005 (identical copy executed
by each holder) (Incorporated by reference to the Company's
Report on Form 10-KSB filed with the Securities and Exchange
Commission on March 31, 2005).
10.3 Securities Purchase Agreement between the Company and
certain investors dated January 18, 2005, as amended by a
First Amendment dated January 28, 2005 and a Second
Amendment dated February 28, 2005 (Incorporated by reference
to the Company's Report on Form 8-K filed with the
Securities and Exchange Commission on March 4, 2005)
10.4 Loan Agreement Between Amen Properties, Inc. and Western
National Bank (Incorporated by reference to the Company's
Report on Form 8-K filed with the Securities and Exchange
Commission on March 4, 2005).
10.5 Western National Bank Revolving Line of Credit Note
(Incorporated by reference to the Company's Report on Form
8-K filed with the Securities and Exchange Commission on
March 4, 2005).
11 Computation of Earnings Per Share
31.1 Certification of Chief Executive Officer.
31.2 Certification of Chief Financial Officer.
32.1 Certification of Chief Executive Officer Pursuant to 18 USC
ss. 1350.
32.2 Certification of Chief Financial Officer Pursuant to 18 USC
ss. 1350.
99.1 Press release Second Quarter 2005 Form 10-QSB
32